Need to Dissolve your Business? Make sure to Follow These Steps
Sadly for many businesses, there comes a time when you may need to dissolve the company.
While this isn’t a time you may have planned for, knowing what you need to do when dissolving a company is vital to ensure all proper channels and legal obligations have been observed.
Are You A Corporation or LLC Business?
The company’s shareholders must approve the breakup of a corporation. Incorporations, the shareholders must approve the action; in limited liability companies (LLCs), the action must be approved by the owners.
Shareholders or members of small companies are often active in day-to-day activities and are familiar with the circumstances. The dissolution process and necessary approvals are usually outlined in a corporation’s bylaws and an LLC’s operating agreement.
The board of directors should draft and accept the resolution to disband to comply with corporate formalities. Shareholders then vote on the resolution that the board has approved of directors.
Both activities should be reported and kept in the company’s files. Although LLCs are not subject to the same formalities as corporations, it is always good to record the decision and get member approval.
File A Certificate of Dissolution with the State
After shareholders or representatives vote to dissolve the company, paperwork must be filed with the state where the company was formed. If the company is licensed to do business in other jurisdictions, it must file paperwork in those states.
Before a Certificate of Dissolution may be filed in some jurisdictions, the corporation must first obtain tax clearance. Any back-taxes owed by the company or LLC must be charged first in these situations.
To learn more, contact your online incorporator, registered agent, or Secretary of State’s office.
Notify Creditors
You must send a letter to all of your company’s creditors, explaining:
- That your business or limited liability company (LLC) has been dissolved or has filed a notice of intent to dissolve.
- Creditors must submit their claims to a specified address.
- A list of the data that needs to be included in the argument.
- The deadline for filing claims has passed (often 120 days from the date of the notice)
- A statement that if claims are not submitted by the deadline, they will be barred.
Your state can allow creditors who were unknown to the company to file claims at the time of dissolution. You may be forced to publish a notice of your company’s demise in the local newspaper.
If you’re unsure, consult an attorney to find out what your state needs. If you are struggling to meet your financial obligations, you must seek advice and assistance from a company that can assist you, such as Timberline Financial, to help you determine how you can pay back the money you may owe.
Your EIN
When dissolving a company, a common misconception about EIN is that you can cancel or close it. The IRS cannot revoke your EIN. If an EIN is assigned to a company, it becomes its permanent Federal taxpayer identification number.
The EIN is never reused or reassigned to another business agency, regardless of whether you have used it to file Federal tax returns. The EIN will remain with the business company and can be used at a later time if necessary.
